by
Barbara Kram, Editor | March 22, 2006
Kodak has just announced double-digit increases in the cost of medical imaging films worldwide, blaming the cost of raw materials.
"Staggering silver and petroleum costs began impacting our production expenses early last year," explained Kevin Hobert, president of Kodak's Health Group. "Since then, we've been absorbing these cost increases and isolating our customers from the impact of commodity expenses. But we can no longer do so: The unrelenting rise in costs has led us to the necessary step of having to significantly increase our prices to maintain the viability of our business."
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Since September of 2005, the commodity price for silver has risen almost 50%
Source: Monex Trading
"Other businesses within Kodak have raised their prices for similar reasons," noted Kodak spokesman John LaBella, who cited their graphics unit as an example. "The same costs that we face in making films, other companies face as well."
DOTmed investigated the price history of silver, and the fact is, since the fall of 2005, the price has risen almost 50 percent. The price of oil is also up since the fall of '05. But just how much these two commodities contribute to the cost of manufacturing imaging film is not clear. What is, however, is that these increases are likely to stick.
At the same time, picture archiving and communications systems (PACS) is proliferating in hospitals and imaging centers. According to Frost & Sullivan, global PACS adoption is now at 43 percent and may reach 90 percent by 2010. U.S. hospital CFOs rank digital radiography systems as their highest spending priority.
Kodak is also a leader in digital medical imaging with more than 500 PACS installations worldwide and more than 175 RIS (radiology information system) installations. The built-in obsolescence of film can only help enlarge the digital market.
"All of the film companies have PACS [offerings] ... they have been seeing for years that film is going away in this industry," observed Paul Shumway, vice president of operations for NovaRad, which provides affordable PACS systems to small and medium-sized hospitals. "Two things have happened in the last couple of years: Film costs have gone up and PACS prices have gone down."
NovaRad's systems are priced in the six-figure range, compared to big OEM PACS programs that run in the millions, Shumway reported. NovaRad's model uses off-the-shelf Dell computers bundled with NovaRad proprietary software. Upfront investment is minimized because customers pay a monthly fee. "That way they can fit it within their previous film costs and don't have to make much of a capital expenditure."
With film costs rising and upstarts like NovaRad bringing PACS to the masses, the value equation for PACS improves. But while PACS is popular, and Kodak is transitioning to digital, the latest technology nevertheless remains out of reach for many health care providers who still depend on film-based systems.
"When you consider that the cost of some systems can be in the millions of dollars, film prices are not going to nudge customers toward digital imaging," LaBella said. "You'd like to be able to have manufacturing costs that aren't rising as they are on the film side. It's just a situation we have to deal with."
